FCC Pushes Verizon to Allow Tethering at No Extra Charge

On Tuesday, mobile carrier Verizon Wireless made a "voluntary" contribution of US$125 million dollars to the U.S. Treasury, as part of a Federal Communications Commission consent decree that also slapped down tethering fees the carrier had been charging its customers.

Prior to this action, Verizon had required its customers to pay $20 a month for official tethering functionality on top of their data plan charges.

The FCC was investigating whether the carrier was in compliance with the "C Block rules" pertaining to its acquired license for C Block spectrum. The FCC also looked into whether Verizon was pressuring Google to block Android apps that offer users the capability to "tether" devices -- in essence, sharing an Internet connection.

Verizon maintained that it did nothing wrong.

"Verizon Wireless has always allowed its customers to use the lawful applications of their choice on its networks, and it did not block its customers from using third-party tethering applications," said Rich Young, Verizon spokesperson.

"This consent decree puts behind us concerns related to an employee's communication with an app store operator about tethering applications, and allows us to focus on serving our customers," he told the E-Commerce Times.

The FCC did not respond to our request for further details.

Data Plans and Tethering

As Verizon has moved from unlimited data plans to tiered plans, which also allow users to share their data usage across multiple devices, it essentially should make much of this concern over tethering of data connections moot.

"Actually this is good -- or should be good -- for Verizon," said Ian Fogg, analyst at
IHS Screen Digest. "This will actually drive up usage as users share data on tethered devices, which in turn will drive consumers to spend more on expensive data plans."

"Verizon is also now in a better position, as the industry moves away from unlimited data," he added. "The carriers should actually want people to tether as they use more data and move to those bigger plans."

However, carriers have typically charged simply for the option of allowing tethering, and that could be a fee some other carriers may not want to lose. However, the FCC might not give them a choice and could look to level the playing field moving forward.

"It is unusual to apply a rule like this to only one company, so I expect efforts to drive the other carriers in the same direction will now commence," said Rob Enderle, principal analyst for the Enderle Group.

"From a competitive standpoint, if played right, Verizon could get far more customers," he pointed out, "which likely will have a bigger near-term impact on competitor pricing sooner."

Although this could help Verizon draw in consumers who find this option desirable, "I expect others will now allow this feature to be turned on to avoid those competitive migrations," Enderle told the E-Commerce Times.

"I think this means that tethering will be common here in a few months," he said, "regardless of carrier on phones that support it. Tethering should have always been allowed, in my opinion."

iPhone's Place in Tethering

While Verizon will allow for tethering of Android devices, the next part of the equation is where the iPhone and Apple will fit in. At present, the iPhone actually has the capability to tether, but whether users can do so depends on the carrier. With this in mind, it could be a game-changer going forward for the iPhone maker.

"Apple might decide to make this a feature of the iPhone 5, though, to help drive migrations to that product," suggested Enderle, "but that would be Apple's decision regardless now."

It is also likely Apple won't be alone in making tethering a selling point -- one that even Verizon will embrace.

"Going forward, we'll now likely see this on more and more phones," said Enderle.